China’s good personal tax system design highlights five international comparative advantages

China’s good personal tax system design highlights five international comparative advantages

“International Comparative Study of China’s Annual Individual Income Tax Collection” released

Market Information Network 2021-12-23 11:23:49 Source: People’s Daily Online Comment:

People’s Daily Online, Beijing, December 22 (Reporter Wang Zhen) According to the website of the State Administration of Taxation, recently, the research team of the China International Taxation Research Association released the “International Comparative Study of China’s Annual Individual Income Tax Annual Report” (hereinafter referred to as the “Report”). Relying on good system design and fast and convenient informatization support, China’s personal tax has shown certain international comparative advantages in five aspects.

The “Report” uses the national final settlement data as a sample of the past two years, and selects the personal income tax declaration data of six countries (regions) including the United States and Canada for comparative research, and evaluates the actual effect of China’s annual personal income tax calculation from an international perspective. And put forward a number of suggestions for further improving China’s annual personal income tax system. The “Report” believes that China’s second annual comprehensive income calculation of personal income tax has been successfully completed. The successful implementation of the two annual calculations is an important milestone in the reform of China’s personal income tax system, especially in the reform of tax collection and management for natural persons.

——The comprehensive income prepayment system of China’s personal income tax is highly accurate

The “Report” has calculated the non-refundable non-refundable rate of annual accounts in recent years based on the declared data disclosed by various countries. The number of non-refundable non-refundable people in China in 2019 and 2020 accounted for 42.96% and 35.20% of the total number of participants in the finals, respectively, with an average of 39.08%, which is much higher than the average non-refundable non-refundable rate of 7.26% in Australia in the past three years and Canada’s non-refundable rate in 2019 The non-refundable rate is 9.55%. The “Report” believes that this illustrates the accuracy of China’s withholding and prepayment system. A large number of taxpayers found that their withholding and prepayment tax amounts are exactly the same as the annual tax payment in the process of annual accounting. Only a simple confirmation is required to complete the declaration, and the tax burden is greatly reduced. In addition, the survey data on the tax rebate rate also supports this view. China’s average annual tax rebate rate for 2019-2020 is 48.65%, which is 10 percentage points lower than that of the United States and Japan, 6 percentage points higher than China’s Taiwan region, and 15 percentage points higher than China’s Hong Kong Special Administrative Region. In view of the steady trend of historical tax rebate rates in relevant countries (regions), the “Report” believes that under China’s current personal income tax system, the annual tax rebate rate is at a reasonable level in the international arena, reflecting China’s relatively comparative prepayment system for personal income tax. Accurate and efficient, while ensuring the balanced storage of tax revenues, the number of people who apply for tax refunds through annual accounts is controlled within a reasonable range.

——The design of China’s tax rebate mechanism demonstrates the concept of “Taxpayer-centered”

The current withholding and prepayment and final settlement system have effectively avoided the trouble of “pay more in advance and refund more tax”, and try to ensure that most taxpayers can accurately prepay taxes and enjoy the benefits in advance during the withholding and prepayment process. Reform dividend. The tax rebate per capita in 2019 and 2020 is RMB 581.61, which is far lower than the tax rebate per capita in the United States, Canada, Australia, Japan, Hong Kong Special Administrative Region of China, and Taiwan.

From the perspective of tax system design, in order to improve tax law compliance, some countries have made tax rebates the mainstream settlement method for annual accounting. This is certainly an effective measure, but if the system design is unreasonable and inaccurate, it may also cause excessive tax rebates. In the case of high taxes, a large amount of taxpayer’s funds are occupied, which may give taxpayers a bad experience of “excessive tax burden”. China adheres to the development concept of “people-centered”, fully deduces and analyzes when designing the system, and controls the tax rebate amount and tax rebate rate within a reasonable range, which will help reduce taxpayers’ tax burden and enhance taxpayers’ sense of gain.

——China’s electronic filing rate is at a relatively high level internationally

China’s electronic filing rate is at a relatively high level in the world, and the application of the personal tax APP in the annual financial calculation is a milestone in the integration of “Internet +” and tax management. According to the “number of completed electronic filings” announced by the United States in each year, the electronic filing rate of each year in the United States can be calculated. The electronic personal income tax filing rate in the United States has gradually increased in the past six years, from 68.09% in 2015 to a gradual increase to 87.50%, and an increase of nearly 15 percentage points in 2020 compared with 2019 (the new crown pneumonia epidemic is an important factor), and the six-year average electronic filing rate is 73.51%.

According to the two annual calculation data, China’s electronic filing rate is above 95%, which is more than 20% higher than that of the United States. In terms of practical effects, the tax authorities have achieved good results in the promotion of the “Individual Income Tax APP”. Most taxpayers use mobile APP to declare and complete tax refunds and make up taxes. Tax informatization has played a huge role in the management of personal income tax collection.

——The pre-filling service of Chinese declaration form items is at a high level internationally

The “Report” examines the pre-filled service levels of various countries in three sub-dimensions: whether the income items are pre-filled, the pre-fill rate, and the pre-fill utilization rate. The data shows that the United States, Canada, Japan, Australia and other countries all use pre-fill services. The U.S. pre-filled 6 items among the 8 major income items, with a pre-fill rate of 75%; Canada divided the income into 5 categories and 25 items, of which 18 items were pre-filled, with a pre-fill rate of 72%; Japanese declaration form A total of 19 items of income in 10 categories are listed above. Among them, there are 8 categories of comprehensive income, 2 of which are without pre-filling, and the pre-filling rate is 75%; Australia divides the income into 10 items, of which 2 items are without pre-filling. The filling rate is 80%.

China’s 2019 financial report pre-filled wages, salaries, royalties, and continuous labor services under comprehensive income. The pre-fill rate reached 62.5%. In 2020, all four comprehensive income items will be pre-filled, with a pre-fill rate of 100. %. Judging from the utilization rate of pre-filling, China’s 2019 and 2020 final accounts have reached 94.35% and 97.95% respectively, indicating that the pre-filled items are relatively accurate, and taxpayers generally use the pre-filling services provided by tax authorities.

——China’s tax refund time is faster than the international average

The tax refund time for electronic filing in the United States is 24 hours to 21 days, and in some cases more than 21 days, the paper filing is 6 to 8 weeks; the average time for filing a tax refund in Canada is 2 weeks, and the filing time for filing a paper return is 8 weeks. If you submit a non-resident individual income tax return outside Canada, it can take up to 16 weeks to get your tax refund; the Australian tax refund time is 2 weeks for electronic filing and 10 weeks for paper filing. The electronic filing rate in China has exceeded 95%, and the corresponding tax refund time is generally 3-14 days, with an average of 11.84 days, which is faster than the average level of the above-mentioned countries.

In short, after two annual calculations in 2019 and 2020, China’s annual personal income tax calculation system in practice has achieved sufficient third-party data acquisition, simpler declaration, high electronic declaration rate and reasonable design of tax rebate mechanism.

The “Report” also pointed out that although the effect of China’s two annual individual income tax calculations exceeded expectations, it was required by the standard “14th Five-Year Plan” and the “Opinions on Further Deepening the Reform of Tax Collection and Administration” issued by the Central Office and the Office of the State Council. There are also some areas that need to be worked hard, such as the taxation management legislation for natural persons to be improved urgently; how to optimize the maximum nominal tax rate and the setting of tiers to promote vertical fairness; how to further improve the “one-person” information collection of natural persons. These issues need to be gradually improved to achieve new breakthroughs in the quality and efficiency of taxation services and collection and management.

Editor in charge: Liu Yuan